Buying a flat, plot or commercial space in India? Did you know that you — the buyer — are legally responsible for deducting TDS (Tax Deducted at Source) before making payment to the seller? Most buyers only discover this after registration, and then face penalties, interest, and a lot of headache trying to fix it. Under the new Income Tax Act, 2025 — which has replaced the Income Tax Act, 1961 with effect from 1st April 2026 — the TDS rules on purchase of immovable property have been restated with clearer language and updated form numbers. This article is your end-to-end guide to TDS on purchase of immovable property for Tax Year 2026-27, covering both resident sellers and non-resident (NRI/foreign) sellers. Whether you are a first-time homebuyer or a seasoned property investor, read this before you sign that sale deed.
| Quick Summary — Key Takeaways |
| ✔ Buyers purchasing property from a RESIDENT seller for ₹50 lakh or more must deduct TDS @ 1% under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025. |
| ✔ TDS is calculated on consideration paid OR stamp duty value, whichever is HIGHER. |
| ✔ For a NON-RESIDENT seller, TDS is governed by Section 393(2) [Table: Sl. No. 17] — rates are ‘rates in force’ and apply from the very first rupee (no threshold). |
| ✔ TDS must be deposited using Form No. 141 (the new challan-cum-statement) within 30 days from the end of the month of deduction. |
| ✔ ‘Consideration’ now legally includes parking charges, club membership fees, maintenance charges, and other incidental amounts paid in connection with the purchase. |
| ✔ Agricultural land is EXCLUDED — no TDS obligation on purchase of agricultural land. |
Page Contents
- Why Does the Buyer Deduct TDS? Isn’t That the Seller’s Job?
- Part A: TDS on Purchase of Property from a Resident Seller
- Worked Examples — TDS from Resident Seller
- Part B: TDS on Purchase of Property from a Non-Resident Seller
- Worked Example — TDS from Non-Resident (NRI) Seller
- TDS on Property: Resident Seller vs. Non-Resident Seller — At a Glance
- Step-by-Step Compliance Guide for the Buyer
- What Happens If You Don’t Deduct or Deposit TDS?
- 5 Common Mistakes Taxpayers Make — And How to Avoid Them
- Frequently Asked Questions
- Conclusion: TDS on Immovable Property Under the New ITA 2025 — Get It Right From Day One
Why Does the Buyer Deduct TDS? Isn’t That the Seller’s Job?
This is the most common question I hear from home-buyers. In most cases, TDS is deducted by the payer — salary by the employer, interest by the bank. But for property transactions, the Government has made the buyer the responsible party. The logic is simple: property deals are high-value, often under-reported, and the Government wants to ensure that the seller’s capital gains (or income from sale) are brought to tax. By making the buyer deduct TDS upfront, a paper trail is created.
This is not new. The old Section 194-IA of the Income Tax Act, 1961 did the same job. Under the new Income Tax Act, 2025, the equivalent provision is Section 393(1) [Table: Sl. No. 3(i)] for resident sellers. The law is the same in substance — only the section numbers and form numbers have changed.
Part A: TDS on Purchase of Property from a Resident Seller
Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 governs TDS when a buyer purchases immovable property from a resident seller. Here is a full breakdown of all the conditions, rates, and compliance steps.
Who Must Deduct? Who Is Exempted?
Any person who pays consideration for transfer of immovable property to a resident seller is required to deduct TDS. This means an individual, HUF, company, firm, or any other entity acting as the buyer can be a deductor. There is one important carve-out: if the acquisition is by way of compulsory acquisition under any law, that falls under Section 393(1) [Table: Sl. No. 3(iii)] at a TDS rate of 10% — not under Sl. No. 3(i).
What Properties Are Covered?
The provision covers immovable property, which is defined under Section 26(19) of the ITA 2025 to mean “any land (other than agricultural land) or any building or part of a building”. So it covers:
- Residential flats and apartments
- Independent houses and bungalows
- Commercial offices and shops
- Plots and non-agricultural land
- Industrial premises and warehouses
It does NOT cover agricultural land. No TDS is required when buying agricultural land from a resident, regardless of the price.
What Is the TDS Rate and Threshold?
The TDS rate under Section 393(1) [Table: Sl. No. 3(i)] is 1%. However, the base on which the 1% is applied is important:
- TDS is deducted on consideration for transfer of the immovable property, OR
- The stamp duty value of the property — whichever is HIGHER
The threshold for TDS is ₹50 lakh. As per Note 3 to Section 393(1) [Table: Sl. No. 3], TDS is required where the consideration for transfer OR the stamp duty value of the property is equal to or greater than ₹50 lakh. If both the actual consideration and the stamp duty value are below ₹50 lakh, no TDS is required.
One important clarification: Note 1 under Table Sl. No. 3 states that where there are multiple buyers or multiple sellers, the ‘consideration’ for the purpose of the ₹50 lakh threshold is the aggregate of all amounts paid by ALL transferees to ALL transferors for that property. Each buyer’s proportionate share is used to calculate their TDS amount, but the threshold test is applied on the total deal value.
What Is Included in ‘Consideration’?
This is where many buyers make mistakes. Section 26(9) of the ITA 2025 gives an expansive definition: ‘consideration for transfer of any immovable property’ includes all charges of the nature of:
- Club membership fee
- Car parking fee
- Electricity or water facility fee
- Maintenance fee
- Advance fee
- Any other charges of similar nature incidental to transfer of the immovable property
Practical impact: If you are buying a ₹60 lakh flat and the builder charges ₹2 lakh extra for a car parking slot and ₹1 lakh for club membership, your TDS base is ₹63 lakh, not ₹60 lakh. Do not exclude these amounts.
Do You Need a TAN to Deduct TDS on Property?
No. Unlike most TDS situations, the buyer deducting TDS on immovable property does NOT need a TAN (Tax Deduction and Collection Account Number). As per Section 397(1)(c)(i) of the ITA 2025, persons who are required to deduct tax under Section 393(1) [Table: Sl. No. 3(i)] are specifically exempted from the TAN requirement. Your PAN is sufficient.
How and When to Deposit the TDS — Form No. 141
Under the new Income Tax Rules, 2026, TDS on immovable property is deposited using Form No. 141 — the Challan-cum-Statement. This is the replacement for the old Form 26QB. Form No. 141 serves a dual purpose: it acts as the payment challan AND the TDS statement in one go, so there is no separate quarterly return to file for this transaction.
As per Rule 218(3)(b) of the Income Tax Rules, 2026, TDS on immovable property must be deposited within 30 days from the end of the month in which the deduction is made. Likewise, Rule 219(5)(b) mandates that Form No. 141 must be furnished within 30 days from the end of the month of deduction. Both the deposit and the filing are aligned to this 30-day window.
Example: If you make payment to the seller and deduct TDS in the month of May 2026, you must deposit the TDS and file Form No. 141 by 30th June 2026.
TDS Certificate — Certificate u/s 395(4) [Rule 132]
After filing Form No. 141 and depositing the TDS, the buyer is required to issue a TDS Certificate to the seller as per Section 395(4) of the ITA 2025 read with Rule 132 of the Income Tax Rules, 2026. This is the functional equivalent of the old Form 16B under the ITA 1961. The certificate can be generated and downloaded from the TRACES portal after the TDS is deposited and Form No. 141 is processed.
The seller needs this certificate to claim credit for the TDS when filing their income tax return.
Worked Examples — TDS from Resident Seller
Example 1: Straightforward flat purchase
| Example 1 — Flat Purchase in Mumbai (Single Buyer, Single Seller) | |
| Particulars | Amount |
| Agreed sale consideration | ₹ 85,00,000 |
| Stamp duty value (ready reckoner value) | ₹ 90,00,000 |
| Additional charges included in agreement: | |
| Car parking (included in agreement value) | ₹ 2,50,000 |
| Club membership (included in agreement value) | ₹ 1,00,000 |
| Total consideration (already includes above) | ₹ 85,00,000 |
| Stamp duty value | ₹ 90,00,000 |
| Higher of the two (TDS base) | ₹ 90,00,000 |
| TDS Rate (Section 393(1) [Table: Sl. No. 3(i)]) | 1% |
| TDS to be deducted | ₹ 90,000 |
| Amount paid to seller (₹85,00,000 − ₹90,000) | ₹ 84,10,000 |
| TDS to be deposited via Form No. 141 by | 30th of following month |
Example 2: Joint buyers purchasing from a single seller
| Example 2 — Joint Purchase by Husband & Wife (Multiple Buyers) | |
| Particulars | Amount |
| Total sale consideration | ₹ 1,20,00,000 |
| Stamp duty value | ₹ 1,15,00,000 |
| Higher of the two (TDS base = consideration) | ₹ 1,20,00,000 |
| Husband’s share in property | 50% |
| Wife’s share in property | 50% |
| Threshold test: total consideration ≥ ₹50 lakh? | Yes — TDS applies |
| TDS by Husband (1% × ₹60,00,000) | ₹ 60,000 |
| TDS by Wife (1% × ₹60,00,000) | ₹ 60,000 |
| Total TDS deposited | ₹ 1,20,000 |
| Note | Each buyer files a separate Form No. 141 |
Example 3: Consideration below ₹50 lakh but stamp duty value above threshold
| Example 3 — Plot in Hyderabad: Stamp Duty Value Triggers TDS | |
| Particulars | Amount |
| Agreed sale consideration | ₹ 42,00,000 |
| Stamp duty value (circle rate value) | ₹ 56,00,000 |
| Threshold test: stamp duty value ≥ ₹50 lakh? | Yes — TDS applies |
| Higher of consideration vs stamp duty value | ₹ 56,00,000 |
| TDS Rate | 1% |
| TDS to be deducted & deposited | ₹ 56,000 |
| Key lesson | Even if you negotiate a low price, stamp duty value can trigger TDS |
Part B: TDS on Purchase of Property from a Non-Resident Seller
When you buy immovable property in India from a Non-Resident Indian (NRI), a foreign national, or a foreign company, the TDS rules change dramatically. The governing provision is Section 393(2) [Table: Sl. No. 17] of the Income Tax Act, 2025, which is the successor to the widely-used Section 195 of the old Income Tax Act, 1961. Getting this wrong is far costlier — the rates are higher, the forms are more complex, and the consequences of non-compliance are severe.
What Rate of TDS Applies for a Non-Resident Seller?
Section 393(2) [Table: Sl. No. 17] prescribes the rate as “Rates in force” — meaning the rates prescribed under the Finance Act for the relevant tax year, applied to the nature of income arising to the non-resident. For a property sale, this typically means:
- Long-Term Capital Gains (LTCG): 12.5% under Section 197 of the ITA 2025 (for assets held > 24 months). Plus applicable surcharge and Health & Education Cess of 4%.
- Short-Term Capital Gains (STCG): Taxed at slab rates applicable to the non-resident under the Finance Act, plus surcharge and cess. (Considered as 30% + surcharge + cess)
Critically important: there is NO ₹50 lakh threshold for non-resident sellers. TDS must be deducted on every rupee paid, from the very first payment, regardless of deal size.
The Role of the Double Taxation Avoidance Agreement (DTAA)
India has tax treaties (known as DTAAs — Double Taxation Avoidance Agreements) with many countries under Section 159 of the ITA 2025 (equivalent to Section 90/91 of the old ITA 1961). If the country in which the NRI is resident has a DTAA with India, the NRI may be entitled to a lower tax rate or exemption under that treaty.
For example, if an NRI is tax-resident in the USA, the India-USA DTAA may provide a lower rate on capital gains from Indian property. As the buyer, you may deduct TDS at the DTAA rate only if the non-resident seller provides a valid Tax Residency Certificate (TRC) and furnishes information in Form No. 41 (equivalent to the old Form 10F) as required under Section 159(8) of the ITA 2025. If the NRI does not provide this, deduct at the standard ‘rates in force’. Check with your tax consult for this aspect.
Section 395(1) and 395(2) — Lower or Nil Deduction Certificate
Non-resident sellers frequently apply for a lower or nil TDS certificate because the TDS on the entire sale price can far exceed their actual tax liability on capital gains. Section 395(1) of the ITA 2025 (successor to Section 197 of ITA 1961) allows the payee (the NRI seller) to apply to their Assessing Officer for deduction of TDS at a lower rate or NIL.
Separately, Section 395(2) of the ITA 2025 (successor to Section 195(2) of ITA 1961) allows the buyer (payer) to apply to the Assessing Officer for a determination of the appropriate proportion of the sum that is chargeable to tax, so that TDS is deducted only on that portion. This is particularly relevant where the sale proceeds include an element of cost reimbursement or return of principal that is not chargeable to tax.
If a lower/nil certificate is issued under Section 395(1), the buyer must deduct TDS at the rate specified in that certificate and cannot deduct at a higher rate.
Form No. 145 and Form No. 146 — Mandatory Filing Before Remittance
Before remitting any amount to a non-resident that is chargeable to Indian tax, the buyer is required to file Form No. 145 under Rule 220 of the Income Tax Rules, 2026. This is the functional replacement for the old Form 15CA:
- Part A of Form No. 145: Used if total payments in the tax year do not exceed ₹5,00,000.
- Part B of Form No. 145: Used if total payments exceed ₹5,00,000 AND a certificate or order has been obtained from the Assessing Officer under Section 395(1) or (2).
- Part C of Form No. 145: Used if total payments exceed ₹5,00,000 AND a Chartered Accountant’s certificate in Form No. 146 has been obtained (in the absence of an AO certificate).
- Part D of Form No. 145: Used if the payment is NOT chargeable under the ITA 2025 (e.g., the property sale proceeds are fully exempt under DTAA).
Form No. 146 under Rule 221 is the certificate from a Chartered Accountant (the old Form 15CB). The CA certifies the nature of the payment, applicable tax rate, and the amount of TDS. This must be obtained before filing Part C of Form No. 145.
Worked Example — TDS from Non-Resident (NRI) Seller
Example 4: NRI seller with no lower deduction certificate
| Example 4 — NRI Seller (UK Resident), Property Acquired in 2018 | |
| Particulars | Details |
| Sale consideration agreed | ₹90,00,000 |
| Stamp duty value | ₹85,00,000 |
| TDS Base (higher) | ₹ 90,00,000 |
| Nature of gain | Long-Term Capital Gain (held > 24 months) |
| Property acquired before 23rd July 2024? | Yes (2018) |
| Applicable section | Section 393(2) [Table: Sl. No. 17] + Section 197(3) |
| Provisional TDS rate (LTCG) | 12.5% + surcharge + 4% cess |
| Surcharge | 10% |
| Effective TDS rate approx. | ~14.30% (12.5% × 1.10 × 1.04) |
| Approx. TDS to be deducted | 14.30% on ₹ 90 Lakh |
| Form to be filed BEFORE remittance | Form No. 145 (Part C) + Form No. 146 |
| TDS statement to be filed | Not yet released as on 12.04.26 |
| Advice to seller | Apply for lower deduction u/s 395(1) to avoid excess TDS lock-in |
TDS on Property: Resident Seller vs. Non-Resident Seller — At a Glance
| Particulars | Resident Seller | Non-Resident (NRI/Foreign) Seller |
| Governing Section | Section 393(1) [Table: Sl. No. 3(i)] | Section 393(2) [Table: Sl. No. 17] |
| Old Section (ITA 1961) | Section 194-IA | Section 195 |
| TDS Rate | 1% | Rates in force (typically ~14–22% incl. surcharge & cess) |
| Threshold Limit | ₹50 lakh (consideration or stamp duty value, whichever is higher) | NIL — applies from first rupee |
| TDS Base | Higher of: (a) consideration or (b) stamp duty value | Entire consideration (or as determined u/s 395(2)) |
| TAN Required? | No | No |
| Deposit Form | Form No. 141 (Challan-cum-Statement) | Not yet released as on 12.04.2026 |
| Old Deposit Form | Form 26QB | Form 27Q |
| Pre-payment Filing | Not required | Form No. 145 (Parts A/B/C/D) before remittance |
| CA Certificate | Not required | Form No. 146 (for Part C of Form No. 145) |
| TDS Certificate to Seller | Certificate u/s 395(4) — Rule 132 | Certificate u/s 395(4) — Rule 132 |
| Old TDS Certificate | Form 16B | Form 16A (from TRACES) |
| Lower Deduction Route | Section 395(1) | Section 395(1) or Section 395(2) |
| DTAA Benefit Available? | No (domestic provision) | Yes, if valid TRC + Form No. 41 furnished |
| Time Limit to Deposit TDS | 30 days from end of month | 30 days from end of month |
Step-by-Step Compliance Guide for the Buyer
If You Are Buying from a Resident Seller (≥ ₹50 Lakh)
1. Confirm whether the seller is a resident. Ask for PAN and verify residency status.
2. Calculate TDS base: compare actual consideration (including all incidental charges under Section 26(9)) with stamp duty value. Take the higher amount.
3. Deduct TDS @ 1% from the sale consideration at the time of payment (or earlier of credit/payment).
4. Deposit TDS using Form No. 141 (Challan-cum-Statement) within 30 days from the end of the month of deduction. No TAN needed — use your PAN.
5. Download the TDS Certificate (Certificate u/s 395(4) — equivalent of old Form 16B) from the TRACES portal and handover to the seller.
6. The seller will claim credit for this TDS in their income tax return.
If You Are Buying from a Non-Resident (NRI) Seller
7. Confirm NRI status. Obtain the seller’s PAN and Tax Residency Certificate (TRC) if DTAA benefit is claimed.
8. Determine the nature of income (LTCG / STCG) and applicable rate. Consult a CA — this is NOT a DIY exercise.
9. If TDS at full rates would cause hardship, advise the NRI seller to apply for a lower deduction certificate u/s 395(1) well in advance of the registration date.
10. Get a CA to certify the TDS computation in Form No. 146 (old Form 15CB).
11. File Form No. 145 (old Form 15CA) online on the income tax portal BEFORE remitting any funds to the NRI.
12. Deposit the TDS
13. Issue the TDS certificate
What Happens If You Don’t Deduct or Deposit TDS?
Non-compliance with TDS provisions can be costly for the buyer. Here is a quick overview of the consequences — these provisions are carried over from the ITA 1961 into the ITA 2025:
- Interest under Section 401(1)(a) of ITA 2025: Interest @ 1% per month for failure to deduct TDS from the date TDS was deductible to the date of actual deduction.
- Interest under Section 401(1)(b) of ITA 2025: Interest @ 1.5% per month for failure to deposit TDS after deduction, from the date of deduction to the date of actual deposit.
- Penalty under Section 271C of ITA 1961 (Section 462 equivalent in ITA 2025): Equal to the amount of TDS not deducted or not paid.
- Buyer treated as ‘assessee in default’: The purchase price paid without TDS deduction may be disallowed as expenditure in the buyer’s accounts.
- Higher TDS on next payment: If the seller does not furnish a valid PAN, Section 397(2) of ITA 2025 requires TDS to be deducted at 20% instead of 1%.
5 Common Mistakes Taxpayers Make — And How to Avoid Them
Mistake 1: Calculating TDS only on the ‘agreement value’ — ignoring stamp duty value.
Fix: Always compare actual consideration with stamp duty (ready reckoner) value. TDS is on the higher of the two. Many buyers discover this issue at registration and panic because they have already made full payment without deducting TDS.
Mistake 2: Excluding incidental charges (parking, club membership) from TDS calculation.
Fix: Section 26(9) of ITA 2025 explicitly includes all such charges in the definition of ‘consideration’. Include them all in the TDS base.
Mistake 3: Assuming NRI sellers are the same as resident sellers — deducting only 1%.
Fix: Never apply the 1% rate to an NRI seller. Section 393(2) [Table: Sl. No. 17] applies at ‘rates in force’ with no threshold. Under-deduction makes the buyer personally liable for the difference plus interest.
Mistake 4: Not filing Form No. 145 (old Form 15CA) before remitting money to NRI seller.
Fix: Rule 220 of IT Rules 2026 mandates this filing before the remittance. Most banks will also ask for this before processing an international transfer. Get your CA to prepare Form No. 146 first, then file Form No. 145.
Frequently Asked Questions
Q1: I am buying an agricultural plot from a farmer. Do I need to deduct TDS?
No. Agricultural land is explicitly excluded from the definition of ‘immovable property’ under Section 26(19) of the ITA 2025. No TDS obligation under Section 393(1) [Table: Sl. No. 3(i)].
Q2: The seller is an NRI but has an Indian bank account and the money is being paid to that account in India. Is TDS under Section 393(2) still required?
Yes. TDS obligation under Section 393(2) [Table: Sl. No. 17] is determined by the residential status of the seller, not where the money is paid. If the seller is a non-resident, you must comply with Section 393(2) regardless of whether the payment is made in India or abroad.
Q3: The property is purchased in two tranches — one payment in April 2026 and one in July 2026. When do I deduct TDS?
TDS must be deducted at the time of credit or payment, whichever is earlier — on each installment. Deduct 1% from each payment as you make it and deposit Form No. 141 within 30 days from the end of each relevant month.
Q4: The NRI seller has a Section 395(1) lower deduction certificate at 5%. My CA says the rate should be 14%. Whose advice do I follow?
Follow the certificate. Section 395(1)(c) of ITA 2025 clearly states that when a certificate is issued by the Assessing Officer, the buyer must deduct at the rate specified in that certificate. Deducting at a higher rate without justification could create complications for the seller.
Q5: The builder says TDS is the seller’s problem and not mine. Is that correct?
No. The legal obligation to deduct and deposit TDS is squarely on the buyer under Section 393(1) [Table: Sl. No. 3(i)]. If you do not deduct, you — the buyer — become an assessee in default. You cannot shift this obligation contractually. The seller may agree to compensate you, but you remain legally liable to the Income Tax Department.
Conclusion: TDS on Immovable Property Under the New ITA 2025 — Get It Right From Day One
TDS on purchase of immovable property is one of those compliance areas that looks simple on the surface but has real traps for the unwary buyer. Under the Income Tax Act, 2025 for Tax Year 2026-27, the core rules remain the same as the old law — but the section numbers, form numbers, and terminology have changed. As a buyer, knowing whether you are dealing with a resident seller (Section 393(1) [Table: Sl. No. 3(i)], 1%, Form No. 141) or a non-resident seller (Section 393(2) [Table: Sl. No. 17], rates in force, Forms No. 145, 146, 144) makes all the difference in the world.
Remember: stamp duty value can trigger TDS even when your deal value is below ₹50 lakh. Every incidental charge is part of ‘consideration’. For NRI transactions, there is no threshold and the rates are significantly higher. Plan ahead, deduct correctly, deposit on time, and get the TDS certificate to your seller — that is the full compliance chain.
Do you have a specific situation — multiple buyers, distressed sale, NRI inheriting property, builder allotment — where you are unsure of the TDS implications? Share your question in my email casagargambhir@gmail.com , I read and respond to every genuine query.
About the Author: Sagar Gambhir is a Chartered Accountant (CA) and US Certified Public Accountant (US CPA-License awaited).
Disclaimer: This article is for educational and informational purposes only and does not constitute professional tax advice. The provisions discussed are based on the Income-tax Act, 2025 and Income-tax Rules, 2026. Readers are advised to consult a qualified Chartered Accountant for advice specific to their situation. Tax laws are subject to amendments and notifications by the CBDT.
Author Bio
Is Form 145 required when payment is being made to the NRO Account of the non-resident seller?